UNITED
        STATES
 SECURITIES
        AND EXCHANGE COMMISSION
 Washington,
        D.C. 20549
 
 
 **FORM
        10-QSB**
 
 (Mark
        One)
 R
              **QUARTERLY
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934**
 
 **For
        the quarterly period ended June 30, 2007**
  £
              **TRANSITION
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE
                  ACT**
 
 **For
        the transition period from _________to __________**
 
 **Commission
        file number 000-28739**
 
 **Satellite
        Security Corporation**
 *(Exact
        name of small business issuer as specified in its charter)*
 
 **Nevada**
              **91-1903590***(State
                  or other jurisdiction of incorporation or
                  organization)*
              *(IRS
                  Employer Identification No.)*
 
 **P.O.
        Box 880263, San Diego, CA 92168-0263**
 *(Address
        of principal executive offices)*
 
 **(619)
        977-1515**
 *(Issuer's
        telephone number)*
  
 *(Former
        name, former address and former
        fiscal year, if changed since last report)*
 
 Check
        whether the issuer (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 12 months (or for such shorter
        period
        that the registrant was required to file such reports), and (2) has been
        subject
        to such filing requirements for the past 90 days.
 YES
R
        NO £
 
 Indicated
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act).
 YES
£
        NO R
 
 On
        August
        15, 2007, the registrant had outstanding 110,981,560 shares of common stock,
        which is the registrant's only class of common equity.
 
 Transitional
        Small Business Disclosure Format (Check One)
 YES
£
        NO R
  
  
  **EXPLANATORY
        NOTE**
 
 In
        our
        quarterly report on Form 10-QSB for the period ended March 31, 2007, we reported
        that on March 7, 2007, our operating subsidiary, and sole source of revenue,
        Satellite Security Systems, Inc. (“Satellite”), lacked sufficient working
        capital to continue to fund its operations in the ordinary course of business,
        and all Satellite employees were released.  Following that date, we
        then evaluated options for the sale or other disposition of our assets, and
        also
        evaluated options for obtaining additional financing or acquiring or merging
        with another operating company.  As previously reported we have been
        in default under the terms of $3.3 million in Secured Convertible Promissory
        Notes (the “Notes”).
  In
        a
        current report on form 8-K filed with the Commission on July 2, 2007, we
        reported that in June 2007 the holders of these Secured Convertible Promissory
        Notes (the “Noteholders”) informed the Company that they intended to exercise
        their remedies under, among other sources of authority, the California Uniform
        Commercial Code (the "**UCC**") and Section 9620 thereof, pursuant
        to which they may accept collateral in satisfaction of the obligations secured
        by such collateral.  On June 29, 2007 we entered into an agreement
        with the Noteholders (the "Noteholders Agreement") pursuant to which we agreed
        to consent to the Noteholders foreclosure on, and to transfer to the
        Noteholders, substantially all of our assets including the stock of our
        subsidiary entities.  In exchange, the Noteholders agreed to (i)
        convert all outstanding amounts due and all obligations under the Notes into
        an
        aggregate of 2,000,000 shares of our common stock (calculated on a post split
        basis after taking into account the reverse split discussed below); (ii)
        waive
        all breaches, defaults and/or events of default under the loan documents
        related
        to the notes, and all penalties, accrued and unpaid interest, charges, fees
        and
        costs; and (iii) cancel all outstanding Class A common stock purchase warrants
        and Class B common stock purchase warrants issued to the Noteholders in
        connection with the Notes.
  The
        obligations under the Noteholders Agreement are subject to certain conditions,
        including principally a 1 for 500 reverse split of our outstanding common
        stock.    On July 30, 2007 we mailed to our stockholders and
        filed with the Commission a Consent Solicitation Statement seeking approval
        of
        the 1 for 500 reverse stock split and describing the transactions contemplated
        by the Agreement.  Effective as of August 6, 2007, we secured
        sufficient shareholder consents to approve the reverse stock
        split.  We have filed a certificate of amendment to our articles of
        incorporation with the Nevada Secretary of State which will become effective
        on
        August 18, 2007.  Following the effectiveness of the reverse stock
        split, we intend to consummate the transactions contemplated by the Noteholders
        Agreement
  Because
        the Noteholders Agreement was signed on June 29, 2007 prior to the end of
        the
        quarter, and because all conditions to the consummation of the transactions
        contemplated thereunder have been completed in all material respects, the
        disclosure in this report reflects the effect of the consummation of the
        transactions contemplated under the Noteholders Agreement as if it occurred
        on
        June 29, 2007.
  
  **TABLE
        OF CONTENTS**
 
 **Part
                  I — Financial Information**Item
                  1.
              Financial
                  Statements (unaudited)Item
                  2.
              Management's
                  Discussion and Analysis or Plan of
                  OperationsItem
                  3.
              Controls
                  and Procedures**Part
                  II — Other Information**Item
                  1.
              Legal
                  ProceedingsItem
                  2.
              Unregistered
                  Sales of Equity Securities and Use of
                  ProceedsItem
                  3.
              Defaults
                  Upon Senior SecuritiesItem
                  4.
              Submission
                  of Matters to a Vote of Security
                  HoldersItem
                  5.
              Other
                  InformationItem
                  6.
              Exhibits
                  and Reports on Form 8-K
  ***Table
            of Contents***
  **PART
        I — FINANCIAL INFORMATION**
  **ITEM
                  1.**
              **FINANCIAL
                  STATEMENTS**
 **Satellite
        Security Corporation and Subsidiary**
 **Consolidated
        Balance Sheet**
 **(Unaudited)**
 
 **6
                  Months Ended****June
                  30, 2007**
              
              
              **June
                  30, 2006****Assets**Current
                  AssetsCash
                  and cash equivalents
              
              $
              705
              
              
              $
              18,629Accounts
                  receivable, net of allowance for doubtful accounts
              
              
              -
              
              
              
              302,674Inventories,
                  net of allowance
              
              
              -
              
              
              
              467,392Other
                  current assets
              
              
              -
              
              
              
              8,363Total
                  Current Assets
              
              
              705
              
              
              
              797,058Property
                  and equipment, net
              
              
              3,606
              
              
              
              211,601Other
                  AssetsRestricted
                  cash for letter of credit
              
              
              -
              
              
              
              75,000Total
                  Other Assets
              
              
              -
              
              
              
              75,000Total
                  Assets
              
              $
              4,311
              
              
              $
              1,083,659**Liabilities
                  and Shareholders' Deficit**Current
                  LiabilitiesAccounts
                  payable
              
              $
              43,369
              
              
              $
              1,342,949Accrued
                  expenses
              
              
              -
              
              
              
              427,908Customer
                  prepayments
              
              
              -
              
              
              
              68,455Other
                  debt
              
              
              -
              
              
              
              560,658Notes
                  and loans payable to related parties
              
              
              125,440
              
              
              
              1,395,652Total
                  Current Liabilities
              
              
              168,809
              
              
              
              3,795,622Non-Current
                  LiabilitiesNotes
                  payable to related parties, net of current portion
              
              
              -
              
              
              
              840,007Deferred
                  revenue, net of current portion
              
              
              -
              
              
              
              369,478Long-term
                  debt
              
              
              -
              
              
              
              14,138Total
                  Non-Current Liabilities
              
              
              -
              
              
              
              1,223,623Total
                  Liabilities
              
              
              168,809
              
              
              
              5,019,245Commitments
                  and ContingenciesShareholders'
                  DeficitCommon
                  stock, $0.001 par value Authorized - 250,000,000 sharesIssued
                  and outstanding - 110,981,560 shares(1)
              
              
              1,110,982
              
              
              
              99,137Additional
                  paid-in capital
              
              
              9,261,784
              
              
              
              5,463,440Accumulated
                  deficit
              
              
              (10,537,264
              )
              
              
              (9,498,163
              )Total
                  Shareholders' Deficit
              
              
              (164,498
              )
              
              
              (3,935,586
              )Total
                  Liabilities and Shareholders' Deficit
              
              $
              4,311
              
              
              $
              1,083,659
 
 (1)
        Value
        of common stock includes the value of shares to be issued to Noteholders
        per the
        Agreement
 
 The
        accompanying notes are an integral part of these consolidated financial
        statements.
  2
 ***Table
            of Contents***
  **Satellite
        Security Corporation and Subsidiary**
 **Consolidated
        Statements of Discontinued Operations**
 **(Unaudited)**
 
 **For
                  the three months ended**
              
              
              **For
                  the six months ended****June
                  30,**
              
              
              **June
                  30,****2007**
              
              
              **2006**
              
              
              **2007**
              
              
              **2006**Revenues
              
              $
              -
              
              
              $
              449,409
              
              
              $
              96,875
              
              
              $
              655,297Cost
                  of Revenues
              
              
              -
              
              
              
              388,008
              
              
              
              94,823
              
              
              
              561,592Gross
                  Profit
              
              
              -
              
              
              
              61,401
              
              
              
              2,052
              
              
              
              93,705Operating
                  ExpensesResearch
                  and development
              
              
              -
              
              
              
              62,634
              
              
              
              69,986
              
              
              
              137,167Marketing
                  and sales
              
              
              -
              
              
              
              155,951
              
              
              
              42,010
              
              
              
              288,946General
                  and administrative
              
              
              155,485
              
              
              
              872,642
              
              
              
              746,598
              
              
              
              1,468,988Total
                  Operating Expenses
              
              
              155,485
              
              
              
              1,091,227
              
              
              
              858,593
              
              
              
              1,895,101Operating
                  Loss From Discontinued Operations
              
              
              (155,485
              )
              
              
              (1,029,826
              )
              
              
              (856,541
              )
              
              
              (1,801,396
              )Other
                  Income/(Expense)Interest
                  expense
              
              
              (2,345,999
              )
              
              
              (740,524
              )
              
              
              (2,723,316
              )
              
              
              (866,368
              )Net
                  change in fair value of common stock warrants and embedded derivative
                  liability
              
              
              4,238,422
              
              
              
              -
              
              
              
              3,063,108
              
              
              
              -Other
                  income
              
              
              2,120,614
              
              
              
              -
              
              
              
              2,144,385
              
              
              
              -Total
                  Other Income/(Expense)
              
              
              4,013,037
              
              
              
              (740,524
              )
              
              
              2,484,178
              
              
              
              (866,368
              )Net
                  Income/(Loss) From Discontinued Operations
              
              $
              3,857,552
              
              
              $
              (1,770,350
              )
              
              $
              1,627,637
              
              
              $
              (2,667,764
              )Basic
                  and diluted income/(loss) per share from discontinued
                  operations
              
              $
              0.03
              
              
              $
              (0.02
              )
              
              $
              0.01
              
              
              $
              (0.03
              )Weighted
                  average common shares outstanding
              
              
              110,981,560
              
              
              
              98,841,178
              
              
              
              110,981,560
              
              
              
              98,451,038
 
 The
        accompanying notes are an integral part of these consolidated financial
        statements.
  3
 ***Table
            of Contents***
  **Satellite
        Security Corporation and Subsidiary**
 **Consolidated
        Statements of Cash Flows from Discontinued Operations**
 **(Unaudited)**
 
 **For
                  the six months ended**
                **June
                  30****2007**
              
              
              **2006****Cash
                  flows from operating activities:**Net
                  income/(loss) from discontinued operations
              
              $
              1,627,637
              
              
              $
              (2,667,764
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Non-cash
                  interest expense
              
              
              2,784,658
              
              
              
              733,047Gain
                  on change in value of warrants and embedded derivative
                  liability
              
              
              (3,063,108
              )
              
              
              -Common
                  Stock Issued for Service
              
              
              -
              
              
              
              180,000Share-based
                  compensation expense
              
              
              38,975
              
              
              
              53,331Depreciation
                  and amortization
              
              
              11,394
              
              
              
              31,968Amortization
                  of debt issuance costs
              
              
              295,392
              
              
              
              40,000Other
                  non-cash items
              
              
              -
              
              
              
              19,951Changes
                  in operating assets and liabilities:Restricted
                  cash for letter of credit
              
              
              75,000
              
              
              
              -Accounts
                  receivable, net
              
              
              138,325
              
              
              
              (201,138
              )Inventories
              
              
              1,060
              
              
              
              (433,692
              )Other
                  current assets
              
              
              20,803
              
              
              
              -Deferred
                  costs
              
              
              6,108
              
              
              
              -Accounts
                  payable
              
              
              (479,819
              )
              
              
              845,067Accrued
                  expenses
              
              
              (391,521
              )
              
              
              (54,796
              )Deferred
                  revenues/customer prepayments
              
              
              (519,011
              )
              
              
              7,836Other
              
              
              -
              
              
              
              (1,347
              )Net
                  cash from (used) in operating activities
              
              
              545,893
              
              
              
              (1,447,537
              )**Cash
                  flows from investing activities:**Purchases
                  of property and equipment
              
              
              -
              
              
              
              (86,056
              )Net
                  cash used in investing activities
              
              
              -
              
              
              
              (86,056
              )**Cash
                  flows from financing activities:**Repayment
                  of long-term debt
              
              
              (24,889
              )
              
              
              (9,681
              )Proceeds
                  from short-term loan
              
              
              -
              
              
              
              500,000Proceeds
                  from related party loan
              
              
              2,710
              
              
              
              1,171,973Repayment
                  of related party loan
              
              
              -
              
              
              
              (50,000
              )Shareholder
                  advances
              
              
              (800,094
              )
              
              
              105,000Shareholder
                  repayments
              
              
              -
              
              
              
              (181,512
              )Net
                  cash provided (used) by financing activities
              
              
              (822,273
              )
              
              
              1,535,780**Net
                  increase in cash**
              
              
              (276,380
              )
              
              
              2,187**Cash
                  and cash equivalents at beginning of year**
              
              
              277,085
              
              
              
              16,442**Cash
                  and cash equivalents at end of year**
              
              $
              705
              
              
              $
              18,629**Supplemental
                  disclosure of cash flow information:**Cash
                  paid for interest
              
              $
              6,093
              
              
              $
              44,427Conversion
                  of  debt into common stock
              
              $
              3,300,000
              
              
              $
              96,000
 
 The
        accompanying notes are an integral part of these consolidated financial
        statements.
  4
 ***Table
            of Contents***
  **SATELLITE
        SECURITY CORPORATION**
 **CONDENSED
        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **Note
        1 –Basis of Presentation**
  The
        accompanying consolidated financial statements as of June 30, 2007 and for
        the
        six months ended June 30, 2007 and 2006, respectively, are
        unaudited.  The consolidated financial statements and related notes
        have been prepared in accordance with generally accepted accounting principles
        applicable to interim periods.  In the opinion of management, the
        consolidated financial statements reflect all adjustments, consisting only
        of
        normal recurring adjustments, necessary for a fair presentation of the
        consolidated financial position, operating results and cash flows for the
        periods presented.  Certain prior year amounts may have been
        reclassified to conform to current period presentation.
  The
        information contained in the following condensed notes to the consolidated
        financial statements is condensed from that which would appear in the annual
        consolidated financial statements; accordingly, the consolidated financial
        statements should be reviewed in conjunction with the consolidated financial
        statements and related notes thereto contained in the Annual Report on Form
        10-KSB for the year ended December 31, 2006 of Satellite Security Corporation
        (the “Company”). It should be understood that the accounting measurements at an
        interim date inherently involve greater reliance on estimates than at
        year-end.  The results of operations for interim periods presented are
        not necessarily indicative of operating results for the entire
        year.
  The
        accompanying financial statements have been prepared on a going concern basis,
        which contemplates the realization of assets and the satisfaction of liabilities
        in the normal course of business. The Company has incurred significant losses
        to
        date from operations, and has effectively ceased operations as of March 7,
        2007.
        This factor, among others, including continuing negative cash flows from
        operations, negative working capital and shareholder deficiencies indicate
        that
        the Company may be unable to continue as a going concern for a reasonable
        period
        of time. The Company's continuation as a going concern is dependent on its
        ability to generate sufficient cash flow to meet its obligations on a timely
        basis and ultimately to attain profitability.
  **Note
        2 –Discontinued Operations**
  Since
        2005, the Company has continued to incur significant losses from operations,
        continued to generate negative cash flows from operations, and continued
        to
        maintain an excess of current liabilities over current assets and a
        shareholders’ deficit.  On March 7, 2007, the Company’s operating
        subsidiary, and sole source of revenue, Satellite Security Systems, Inc.
        (“Satellite”), lacked sufficient working capital to continue to fund its
        operations in the ordinary course of business, and all Satellite employees
        were
        released.  Satellite effectively ceased operations.  The
        Company currently does not have, and since March 7, 2007, has not had, any
        ongoing business operations or any revenue sources.
  As
        discuss in more detail in Note 5 - Secured Convertible Notes, Embedded
        Derivative and Common Stock Warrants, below, on June 29, 2007, the Company
        and
        its subsidiary, Satellite, entered into an agreement (the "Agreement") with
        the
        holders (the "Noteholders") of the Company's secured convertible promissory
        notes issued in July 2006 (the "Notes").  Under the terms of that
        Agreement, in accordance with the Noteholders remedies under the California
        Uniform Commercial Code, the Company has agreed to consent to the Noteholders'
        foreclosure on substantially all of the Company's assets, including its shares
        of stock in Satellite, in exchange for the Noteholders agreement to waive
        all
        defaults under the notes and to convert the notes into the Company's common
        stock.  The Company intends to complete the transactions contemplated
        under the agreement with the noteholders in August 2007.
  The
        Company's operations for the six months ended June 30, 2007 have been funded
        by
        through unsecured borrowings from the Company's chief executive officer,
        Zirk
        Engelbrecht, totaling $125,440.
  Statement
        of Financial Accounting Standards (“SFAS”) No. 144, *Accounting for the
        Impairment or Disposal of Long-Live Assets,*sets forth the financial
        accounting and reporting requirements for discontinued
        operations.   SFAS No. 144 uses a single accounting model, based
        on the framework established in SFAS No. 121, *Accounting for Impairment of
        Long-Lived Assets and for Long Lived Assets to Be Disposed Of*, to account
        for all long-lived assets to be disposed of by sale, abandonment, or
        distribution to owners.  This includes asset disposal groups meeting
        the criteria for presentation as a discontinued operations.   A
        long-lived asset held for sale shall be measured at the lower of its carrying
        amount or fair value less its cost to sell.  Additionally, in
        accordance with SFAS No. 144, a loss shall be recognized for any write-down
        to
        fair value less cost to sell.  A gain shall be recognized for any
        subsequent recovery of cost.  Lastly, a gain or loss not previously
        recognized that results from the sale of the asset should be recognized at
        the
        date of sale.  Therefore, the Company’s discontinued operations are no
        longer measured on a net realizable value basis, and future operating losses
        are
        no longer recognized before they occur.
  5
 ***Table
            of Contents***
  **Note
        3 –Summary of Significant Accounting Policies**
  *Principles
        of Consolidation*
  The
        consolidated financial statements are prepared using accounting principles
        generally accepted in the United States of America and include the accounts
        of
        the Company and historically its wholly owned subsidiary,
        Satellite.  All significant intercompany balances and transactions
        have been eliminated.   As discussed in Note 5 - Secured
        Convertible Notes, Embedded Derivative and Common Stock Warrants, below,
        given
        the Company's unsuccessful attempts to obtain additional financing or to
        find a
        strategic transaction that would permit it to begin operations, the Company
        and
        its subsidiary, Satellite, agreed to consent to the Noteholders exercise
        of
        their remedies and the foreclosure upon substantially all of the Company's
        assets.  Therefore, as of June 30, 2007, the fair value of all assets
        and liabilities belonging to our subsidiaries have been written off to other
        income.
  *Use
        of Estimates*
  The
        preparation of financial statements in conformity with accounting principles
        generally accepted in the United States of America requires management to
        make
        estimates and assumptions that affect the reported amounts of assets and
        liabilities and also requires disclosure of contingent assets and liabilities
        at
        the date of the financial statements and the reported amounts of revenues
        and
        expenses during the reporting periods.  Actual results could differ
        from those estimates.  Significant estimates made by management
        include the viability of recognizing deferred tax assets, valuation of equity
        instruments, and the allowance for doubtful accounts.  Significant
        changes in these estimates may have a material impact on the financial
        statements.
  *Fair
        Value of Financial Instruments*
  The
        Company estimates the fair value of certain of its assets in accordance with
        SFAS No. 107, *Disclosures About Fair Value of Financial
        Instruments*.  At June 30, 2007, management believes that the
        carrying amounts of cash, accounts receivable, accounts payable, and accrued
        expenses approximate their fair value.  The Company believes that the
        carrying value of its loans approximate their fair values based on current
        market rates of interest, except related party debt.  Management
        believes it is impracticable to determine the fair value of related party
        debt
        because of the related party attributes of that debt.
  *Cash,
        Cash Equivalents*
  Cash
        and
        cash equivalents is comprised of cash and highly liquid time deposits held
        at a
        major financial institution, which from time to time exceed federally insured
        limits.  The Company believes that the risk of any loss related to its
        deposits is minimal.
  Restricted
        cash in other assets of $75,000 at June 30, 2007 represented a letter of
        credit
        deposit to secure the Company’s leased facilities.  On April 2, 2007,
        the Company was forced to vacate its office premises due to non-payment of
        rent,
        a default under the terms of the lease.   As of the date of this
        report, the landlord has the option to collect these funds to apply to the
        remaining lease obligation, but has not yet done so.   At June
        30, 2007 the carrying value of Satellite’s restricted cash was reclassified to
        other income/expense.
  *Accounts
        Receivable*
  Accounts
        receivable are stated at the amounts that management expects to
        collect.  The Company is required to estimate the collectibility of
        its trade receivables.  Considerable judgment is required in assessing
        the ultimate realization of these receivables.  At June 30, 2007 the
        carrying value of Satellite’s accounts receivable was reclassified to other
        income/expense.
  *Inventories*
  Inventories,
        which consist primarily of purchased parts and supplies, are stated at the
        lower
        of cost or market.  Cost is determined by the first-in, first-out
        (FIFO) method.  At June 30, 2007 the inventory had been written down
        to its estimated net realizable value and the net realizable value of
        Satellite’s inventories was reclassified to other income/expense.
  6
 ***Table
            of Contents***
  *Debt
        Issuance Costs*
  Debt
        issuance costs are deferred and amortized over the term of the related credit
        facility using the effective interest method.  When a loan is paid in
        full (or converted or extinguished), any unamortized financing costs are
        removed
        from the related accounts and expensed.  The Company issued
        convertible notes in July 2006 and incurred issuance costs
        of  $350,000, which were being amortized over the life of the
        notes.  The Agreement the Company entered into with the Noteholders in
        June 2007 calls for the conversion of all amounts due under the Notes into
        the
        Company’s common stock.  Therefore, the unamortized financing costs
        related to this transaction were reclassified to interest expense at June
        30,
        2007.
  *Deferred
        Costs*
  Deferred
        costs represent the cost of hardware associated with deferred monitoring
        revenue
        which is amortized over the period of monitoring service.  At December
        31, 2006 the Company recorded an impairment charge of $110,451 on the value
        of
        deferred costs due to the determination that the asset would not be
        recovered.  At June 30, 2007 carrying value of Satellite’s deferred
        costs was reclassified to other income/expense.
  *Property
        and Equipment*
  Property
        and equipment is recorded at cost and depreciated using the straight-line
        method
        over the estimated useful lives of the assets, generally ranging from three
        to
        five years.  Expenditures for ordinary repairs and maintenance are
        expensed as incurred while major additions and improvements are
        capitalized.
  *Impairment
        of Long-Lived Assets*
  Long-lived
        assets, such as property and equipment, are reviewed for impairment annually
        and
        whenever events or changes in circumstances indicate that the carrying amount
        of
        an asset may not be recoverable. Recoverability of assets to be held and
        used is
        measured by a comparison of the carrying amount of an asset to estimated
        undiscounted future cash flows expected to be generated by the asset. If
        the
        carrying amount of an asset exceeds its estimated future cash flows, an
        impairment charge is recognized by the amount by which the carrying amount
        of
        the asset exceeds the fair value of the asset.   At December 31,
        2006 the Company recorded an impairment charge on the net value of property
        and
        equipment.
  *Warranty
        Reserve*
  The
        Company’s hardware is sold with a warranty against defects in material and
        workmanship for a period of one year from the date of sale.  Hardware
        manufactured by third parties is typically covered by a one year warranty
        from
        the product manufacturer.  Anticipated future warranty costs are
        estimated, based upon historical expenses and an analysis of product field
        failures.  At June 30, 2007 carrying value of Satellite’s warranty
        reserve was reclassified to other income/expense.
  *Customer
        Prepayments*
  Customer
        prepayments relate primarily to amounts received in advance for monitoring
        services for which the period of service extends beyond the balance sheet
        date.  At June 30, 2007 carrying value of Satellite’s customer
        prepayments was reclassified to other income/expense.
  *Derivatives*
  Under
        Emerging Issues Task Force (EITF) Issue
        No. 00-19,**“Accounting for Derivative Financial Instruments
        Indexed to, and Potentially Settled in, a Company’s Own Stock”, the initial
        balance sheet classification of contracts that require net cash settlement
        are
        recorded as assets or liabilities and contracts that require settlement in
        shares are recorded as equity instruments.  At each balance sheet
        date, the Company reviews contracts and equity instruments that are to be
        settled in common stock to determine if sufficient common shares are available
        to satisfy the maximum number of shares that could be required to net-share
        settle the contracts, among other conditions.  Changes in fair value
        are accounted for in the consolidated statement of operations.  The
        agreement the Company entered into with the Noteholders calls for the conversion
        of all amounts due under the Notes into the Company’s common
        stock.  Therefore, the embedded derivative liability related to this
        transaction was reclassified to other income/expense at June 30,
        2007.
  7
 ***Table
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  *Warrant
        Derivative Liability*
  The
        Company accounts for warrants issued in connection with financing arrangements
        in accordance with EITF Issue No. 00-19, “Accounting for Derivative Financial
        Instruments Indexed to, and Potentially Settled in, a Company’s Own
        Stock.”  Pursuant to EITF 00-19, an evaluation of specifically
        identified conditions is made to determine whether the fair value of warrants
        issued is required to be classified as a derivative liability. The fair value
        of
        warrants classified as derivative liabilities is adjusted for changes in
        fair
        value at each reporting period, and the corresponding non-cash gain or loss
        is
        recorded in the consolidated statement of operations. Under the terms of
        the
        agreement the Company entered into with the Noteholders in June 2007, all
        outstanding Class A common stock purchase warrants and Class B common stock
        purchase warrants issued to the Noteholders in connection with the issuance
        of
        the notes will be cancelled.  Therefore, the warrant derivative
        liability related to this transaction was reclassified to other income/expense
        at June 30, 2007.
  *Revenues
        and Costs of Revenue*
  Until
        Satellite ceased operations, the Company’s revenues were derived from two
        sources, the sale of hardware that uses Global Positioning System (“GPS”),
        cellular and ReFLEX paging technology, and the provisioning of asset tracking
        and related monitoring services.  Revenue related to the sale of
        hardware products was recognized upon delivery if no significant vendor
        obligations remain, the price is fixed or determinable and collection is
        reasonably assured.  Monthly billings for services are presented in
        advance of rendering the related services.  Customer prepayments
        consists of advanced payments of these billings and was recognized as revenues
        ratably over the minimum service contract period, generally one to five
        years.  Costs of revenues include all direct material and labor costs
        and those indirect costs related to contract performance.  The cost of
        installed hardware related to customer advance payments is amortized over
        the
        same period as the related revenue.  However, since Satellite has
        ceased operations and currently has no funding sources, management does not
        believe that it will be able to meet any future monthly service obligations
        that
        are outstanding as of June 30, 2007 in connection with the service
        agreements.  Satellite’s deferred revenues were reclassed to other
        income at June 30, 2007.
  *Share-Based
        Compensation*
  On
        December 16, 2004, the Financial Accounting Standards Board (FASB) issued
        FASB Statement No. 123 (revised 2004), “Share-Based Payment” (“Statement
        123(R)”) which is a revision of FASB Statement No. 123, “Accounting for
        Stock-Based Compensation” (“Statement 123”).  Statement 123(R)
        supersedes APB Opinion No. 25 (APB 25), “Accounting for Stock Issued to
        Employees,” and amends FASB Statement No. 95, “Statement of Cash Flows.”
The approach to accounting for share-based payments in Statement 123(R) is
        similar to the approach described in Statement 123. However, Statement 123(R)
        requires all share-based payments to employees, including grants of employee
        stock options, to be recognized in the financial statements based on their
        fair
        values and no longer allows pro forma disclosure as an alternative to financial
        statement recognition.
  Under
        Statement 123(R), share-based compensation cost is measured at the grant
        date,
        based on the estimated fair value of the award, and is recognized as an expense
        over the employee’s requisite service period.  The Company adopted the
        provisions of Statement 123(R) effective January 1, 2006, using a modified
        prospective application, which provides for certain changes to the method
        for
        valuing share-based compensation.  Under the modified prospective
        application, prior periods are not revised for comparative
        purposes.  The valuation provisions of Statement 123(R) apply to new
        awards and to awards that are outstanding at the effective date and subsequently
        modified, repurchased or cancelled.  Estimated compensation expense
        for awards outstanding at the effective date will be recognized over the
        remaining service period using the compensation cost calculated for pro-forma
        disclosure purposes under Statement 123.
  On
        April 19, 2006, the Company's stockholders adopted the 2006 Equity
        Incentive Plan to provide stock equity awards to eligible employees, directors,
        and consultants of the Company and its affiliates.  The Company used
        the Black-Scholes method (which models the value over time of financial
        instruments) to estimate the fair value at grant date of the options. The
        Black-Scholes method uses several assumptions to value an option. The Company
        used the following assumptions:
  ·
              Expected
                  Dividend Yield—because the Company does not currently pay dividends,
                  expected dividend yield is
                  zero.
  8
 ***Table
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 ·
              Expected
                  Volatility in Stock Price—due to the relatively short period of time since
                  the merger between Satellite and Satellite Security Corporation
                  (formerly
                  Celtron), the expected volatility in stock price reflects the historical
                  change in a competitor of the Company’s stock price over the expected term
                  of the stock option.
 ·
              Risk-free
                  Interest Rate—reflects the average rate on a United States Treasury bond
                  with maturity equal to the expected term of the
                  option.
 ·
              Expected
                  Life of Stock Awards—reflects the simplified method to calculate an
                  expected life based on the midpoint between the vesting date and
                  the end
                  of the contractual term of the stock
                  award.
 
 On
        March
        7, 2007 Satellite released all of its employees.  The Company recorded
        share based compensation expense through each employee’s final date of
        service.  The share-based compensation expense calculated using the
        Black-Scholes model for grants at June 30, 2007 is as follows:
  For
                  the six months ended June 30, 2007Research
                  and development
              
              $
              350Marketing
                  and sales
              
              
              8,520General
                  and administrative
              
              
              8,105Share-based
                  compensation
              
              $
              16,975
 
 There
        were no vested options available for purchase at the time Satellite ceased
        operations.  Therefore, all outstanding options were
        forfeited.  A summary of option activity as of June 30, 2007 is as
        follows:
  Options
              
              Shares
              
              
              Weighted-Average
                  Exercise Price
              
              
              Weighted-Average
                  Remaining Contractual Term
                (in
                  years)Outstanding
                  Options at December 31, 2006
              
              
              9,123,077
              
              
              $
              0.127
              
              
              
              9.40Granted
              
              
              -
              
              
              
              -
              
              
              
              -Exercised
              
              
              -
              
              
              
              -
              
              
              
              -Forfeited,
                  cancelled or expired
              
              
              (9,123,077
              )
              
              $
              0.127
              
              
              
              -Outstanding
                  at June 30, 2007
              
              
              -
              
              
              
              -
              
              
              
              -Exercisable
                  at June 30, 2007
              
              
              -
              
              
              
              -
              
              
              
              -
 
 There
        were no new grants for the six months ended June 30, 2007.  There were
        no options exercised for the six months ended June 30, 2007.
  *Issuance
        of Stock for Non-cash Consideration*
  All
        issuances of the Company's common stock for non-cash consideration have been
        assigned a dollar amount equaling either the market value of the shares issued
        or the value of consideration received, whichever is more readily determinable.
        The majority of the non-cash consideration received pertains to services
        rendered by consultants and others and has been valued at the market value
        of
        the shares issued.
  The
        Company's accounting policy for equity instruments issued to consultants
        and
        vendors in exchange for goods and services follows the provisions of EITF
        Issue
        No. 96-18, *Accounting for Equity Instruments That are Issued to Other Than
        Employees for Acquiring, or in Conjunction with Selling, Goods or Services*
        and EITF Issue No. 00-18, *Accounting Recognition for Certain Transactions
        Involving Equity Instruments Granted to Other Than Employees*. The
        measurement date for the fair value of the equity instruments issued is
        determined at the earlier of (i) the date at which a commitment for performance
        by the consultant or vendor is reached or (ii) the date at which the consultant
        or vendor's performance is complete.
  9
 ***Table
            of Contents***
  *Basic
        and Diluted Net Loss Per Share*
  The
        Company computes net loss per share in accordance with SFAS No. 128,
*Earnings per Share*.  SFAS No. 128 requires presentation of
        both basic and diluted earnings per share (“EPS”) on the face of the income
        statement. Basic EPS is computed by dividing net loss available to common
        shareholders (numerator) by the weighted average number of shares outstanding
        (denominator) during the period. Diluted EPS gives effect to all instruments
        which could result in the issuance of potentially dilutive common shares
        outstanding during the period, if any, including stock options, using the
        treasury stock method, and convertible notes, using the if-converted method.
        In
        computing diluted EPS, the average stock price for the period is used in
        determining the number of shares assumed to be purchased from the exercise
        of
        stock options or warrants. The potential issuance of additional common stock
        has
        not been included in the computation of diluted loss per share, as the effect
        would be anti-dilutive.
  **Note
        4 - Property and Equipment**
  Property
        and equipment as of June 30, 2007 consists of the following:
  Furniture
                  and equipment
              
              $
              194,228Software
                  costs
              
              
              145,624Total
                  property and equipment
              
              
              339,852Less:Reserve
                  for impairment
              
              
              (88,618
              )Less:Accumulated
                  depreciation
              
              
              (247,628
              )Net
                  property and equipment
              
              $
              3,606
  The
        Company has reduced the carrying amount of its property and equipment with
        an
        impairment charge which is included in the accompanying consolidated statements
        of operations. As a result, the carrying amount of property and equipment
        totaled $3,606 at June 30, 2007. Depreciation expense for the six months
        ended
        June 30, 2007 and 2006 was $11,394 and $31,968, respectively.
  **Note
        5 - Secured Convertible Notes, Embedded Derivative and Common Stock
        Warrants**
  On
        July 13, 2006 the Company entered into a secured convertible note and
        warrant financing transaction (the “Secured Note Financing”) with a group of
        unrelated accredited investors in which the Company issued an aggregate of:
        (i) $3.3 million of Secured Convertible Promissory Notes (the “Notes”);
        (ii) 18,006,221 Series A Warrants exercisable at $0.13 per share and;
        (iii) 18,006,221 Series B Warrants exercisable at $0.143 per
        share.  The Series A and Series B warrants expire on July 13,
        2011.
  The
        Secured Note Financing resulted in net proceeds to the Company of $2,947,550
        after deducting finder’s fees of $330,000, note issue costs of $20,000 and other
        expenses of $2,450.  In connection with the Secured Note Financing,
        the Company also granted 3,601,244 Series A warrants at an exercise price
        of
        $0.13 per share to an investment banker as a finder’s fee.  In
        addition, the Company will be required to pay finder’s fees totaling 10% of the
        cash proceeds received by the Company upon exercise of any of the Series
        A or
        Series B Warrants.  The Company used the proceeds from the Secured
        Note Financing for general working capital purposes.
  $350,000
        of the transaction costs incurred in connection with the Secured Note Financing
        were deferred and were scheduled to be amortized using the interest method
        over
        the three-year life of the Notes.
  The
        amounts outstanding under the Notes bear interest at the rate of 10% per
        annum, payable on a quarterly basis.  The Notes mature on
        July 13, 2009 and are secured by a lien on substantially all of the
        Company’s assets, including a pledge of its shares in Satellite.  The
        Company was unable to make the required interest payment for the quarters
        ended
        December 31, 2006, March 31, 2007 and June 30, 2007.  The Company is
        currently in default under the Notes.  The entire balance of the Notes
        was reclassified as short term debt due to the default at December 31,
        2006.
  In
        accounting for the Notes and the Class A and Class B common stock purchase
        warrants, the Company considered the guidance contained in EITF No. 00-19,
        *Accounting for Derivative Financial Instruments Indexed To, and Potentially
        Settled In, a Company’s Own Common Stock*, and SFAS No. 133
*Accounting for Derivative Instruments and Hedging
        Activities*.  In accordance with the guidance provided in EITF No.
        00-19, the Company determined that the conversion feature of the Notes
        represents an embedded derivative since the Notes are convertible into a
        variable number of shares upon conversion and a liquidated damage clause
        contained in the registration rights agreement related to the Notes requires
        the
        Company to pay liquidated damages of 2.0% for each 30 days, or part
        thereof, of the outstanding principal amount of the Notes, in cash or registered
        shares of common stock to the Noteholders in the event that a registration
        statement covering the shares underlying the Notes and warrants was not declared
        effective by December 10, 2006.  Accordingly, the Notes are not
        considered to be “conventional” convertible debt under EITF No. 00-19 and thus
        the embedded conversion feature must be bifurcated from the debt host and
        accounted for as a derivative liability.
  10
 ***Table
            of Contents***
  The
        Company calculated the fair value of the embedded conversion
        feature  and warrants using the Black-Scholes method on the closing
        date and again at the date of each reporting period and adjusted the carrying
        value accordingly.  Under the terms of the Secured Note Financing the
        Company has a five day grace period to pay any monetary amounts due under
        the
        Notes, after which grace period any monetary amounts not paid when due bear
        interest at a default interest rate of 15% per annum.  At March
        31, 2007 there was $167,264 of unpaid interest due on the principal of the
        Note.  There was $3,076 of additional interest due on this unpaid
        balance at March 31, 2007.
  In
        connection with the issuance of the Notes, the Company was required to filed
        a
        registration statement and have it declared effective by December 10,
        2006.  That did not occur and it constituted a default that required
        the Company to pay the holder of the Notes liquidated damages of 2.0% of
        the
        principal amount of the Notes for each 30 day period that the effectiveness
        of
        the registration is delayed until the Company’s registration obligations
        terminate on July 13, 2008.   At March 31, 2007 accrued
        liquidation damages were $264,000 and the associated accrued interest was
        $4,069.
  As
        of
        June 1, 2007, there was at least $3.5 million due and owing under the
        Notes.  The Noteholders informed the Company that they intended to
        exercise their remedies under, among other sources of authority, the California
        Uniform Commercial Code (the “UCC”) and Section 9620 thereof, pursuant to which
        they may accept collateral in satisfaction of the obligations secured by
        such
        collateral.  More particularly, the Noteholders informed the Company
        of their desire to accept some of the collateral securing the Company's
        obligations to them in satisfaction of the obligations under the Notes pursuant
        to UCC § 9620(a), subject to obtaining the consent of the Company and of
        Satellite as required by UCC § 9620(c)(i).  Given the Company’s
        unsuccessful attempts to obtain additional financing or to find a strategic
        transaction that would permit the Company to begin operations, the Company,
        Satellite and the Noteholders entered into agreement on June 29, 2007 (the
        “Noteholders Agreement”) pursuant to which the Company and Satellite agreed to
        consent to the Noteholders exercise of their remedies under UCC § 9620 and the
        foreclosure upon substantially all of the Company’s assets, including the shares
        of stock the Company holds in its subsidiaries.  In exchange for the
        Company’s consent, the Noteholders agreed to waive all defaults under the Notes
        and related loan documents, convert the Notes into approximately 90% of the
        Company’s outstanding common stock and cancel their Class A and Class B common
        stock purchase warrants.
  To
        effect
        the conversion of the Notes into common stock, the Noteholders Agreement
        was
        conditioned upon the approval of the Company’s stockholders of a 500 for 1
        reverse split of the Company’s common stock.  Such approval was
        obtained as of August 6, 2007. The Company filed a certificate amendment
        to its
        articles of incorporation to effect the reverse split, which would be effective
        as of August 18, 2007.  After giving effect to the reverse split and
        the transactions contemplated under the Noteholders Agreement, the Noteholders
        would hold 2,000,000 shares of the Company’s common stock, 1,000,000 of which
        would be transferred to Mr. Engelbrecht in exchange for certain commitments
        from
        Mr. Engelbrecht, and the Company’s other existing stockholders would hold
        approximately 220,000 shares of the outstanding common stock.  The
        reverse split is not intended to be a going private transaction.
  The
        Noteholders Agreement calls for the conversion of all amounts due under the
        Notes into the Company’s common stock as well as the cancellation of all
        outstanding Class A common stock purchase warrants and Class B common stock
        purchase warrants issued to the Noteholders in connection with the
        Notes.  Therefore, the embedded derivative liability and warrant
        liability related to this transaction were reclassified to other income/expense
        at June 30, 2007.
  Under
        the
        Noteholders Agreement, the Noteholders agreed to waive all breaches, defaults
        and/or events of default under the Notes and the documents related thereto,
        and
        all penalties, accrued and unpaid interest, charges, fees and
        costs.  Therefore the accrued interest and liquidation damages were
        reclassified to other income/expense at June 30, 2007.
  11
 ***Table
            of Contents***
  **Note
        6 - Debt**
  As
        of
        June 30, 2007, debt consisted of the Notes discussed above and a note payable
        for the purchase of software, which is a liability of Satellite.  In
        accordance with the Noteholders Agreement, all assets and liabilities of
        Satellite will be assumed by the Noteholders with the transfer of 100% of
        Satellite’s shares to the Noteholders.  Accordingly, at June 30, 2007
        the balance of $23,003 of debt was reclassified to other income.
  **Note
        7 - Related Party Transactions**
  *Notes
        and Loans*
  As
        of
        June 30, 2007 related party notes and loans consisted of unsecured advances
        to
        the Company  from its sole director and chief executive officer, Zirk
        Engelbrecht, unsecured advances to Satellite from a shareholder and former
        director of Satellite and an unsecured note payable from Satellite to the
        same
        shareholder and former director.  In accordance with the Noteholders
        Agreement, all assets and liabilities of Satellite will be assumed by the
        Noteholders with the transfer of 100% of Satellite’s shares to the
        Noteholders.  Accordingly, at June 30, 2007 the balance of $931,116 of
        this debt was reclassified to other income.  After giving effect to
        this reclassification, related party notes and loans consisted of the following
        unsecured advances from Zirk Engelbrecht, the Company's CEO.
  Advances
                  – shareholders – unsecured, non-interest bearing, no terms for
                  repayment.
              
              $
              125,440Less:
                  current portion of related-party debt
              
              
              (0
              )Total
                  non-current portion of related party debt
              
              $
              125,440
 
 *Leased
        Facilities*
  During
        the year ended December 31, 2005 Satellite rented its facilities from a
        shareholder and former director. Rent owed to this shareholder amounted to
        $11,206 as of June 30, 2007 and was included in accounts payable.  At
        June 30, 2007 the balance of this debt was reclassified to other
        income.
  *Legal
        Fees*
  The
        Company engaged Workman Nydegger, a law firm, during 2006 and 2005.  A
        relative of John Phillips, the Company’s former chief executive officer, is an
        employee and shareholder of Workman Nydegger.
  *Interest
        of Certain Persons in the Noteholder Agreement and Reverse
        Split*
  Under
        the
        terms of the Noteholder Agreement, the Noteholders agreed, among other things,
        to convert all outstanding amounts due under the Notes into a pro rata portion
        of 2,000,000 shares of the Company’s common stock calculated on a post-reverse
        split basis.  Further, in exchange for certain covenants of Mr.
        Engelbrecht with respect to the assumption of certain of the Company's
        liabilities, the performance of services for the Company and indemnification
        of
        the Company from certain liabilities, the Noteholders each agreed under the
        terms of the Noteholders Agreement to reimburse Mr. Engelbrecht for certain
        expenses incurred in an amount up to $150,000 and to transfer to Mr. Engelbrecht
        or his designee 50% or 1,000,000 shares of the 2,000,000 shares of the Company’s
        common stock issuable to the Noteholders upon conversion of the
        Notes.
  As
        of the
        effective date of the reverse split and after giving effect to conversion
        of the
        Notes and the partial transfer of the shares issuable upon such conversion
        to
        Mr. Engelbrecht as discussed in the paragraph above, Mr. Engelbrecht will
        beneficially own 1,036,999 shares of the Company’s common stock and the
        Noteholders as a group will beneficially own 1,000,000 shares of the Company’s
        common stock, though none of the Noteholders are affiliates of each other
        or
        have agreed to act in concert with respect to their stock holdings.
  **Note
        8 - Commitments and Contingencies**
  In
        the
        course of business, the Company has been, and may continue to be, involved
        in
        various claims seeking monetary damages and other relief.  The amount
        of the ultimate liability, if any, from such claims cannot be determined.
        However, in the opinion of the Company's management, the ultimate liability
        for
        any legal claims currently pending against the Company will not have a material
        adverse affect on the Company's financial position, results of operations
        or
        cash flows. Insofar as current legal claims against the Company that have
        been
        filed or are currently ongoing, see Part II, Item 1 below.
  12
 ***Table
            of Contents***
  **Note
        9- Recent Accounting Pronouncements**
  *Uncertainty
        in Income Taxes*
  In
        July
        2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in
        Income Taxes” (“FIN 48”). FIN 48 requires the use of a two-step approach for
        recognizing and measuring tax benefits taken or expected to be taken in a
        tax
        return and disclosures regarding uncertainties in income tax positions. The
        Company is required to adopt FIN 48 effective January 1, 2007. The cumulative
        effect of initially adopting FIN 48 will be recorded as an adjustment to
        opening
        retained earnings in the year of adoption and will be presented separately.
        Only
        tax positions that meet the more likely than not recognition threshold at
        the
        effective date may be recognized upon adoption of FIN 48. The Company is
        currently evaluating the impact this new standard; however, the standard
        is not
        expected to have a significant impact on the financial position, results
        of
        operation or cash flows.
  *Fair
        Value Measurements*
  In
        September 2006, the FASB issued Statement of Financial Accounting Standards
        No.
        157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 does not require new fair
        value measurements but rather defines fair value, establishes a framework
        for
        measuring fair value and expands disclosure of fair value measurements. SFAS
        157
        is effective for fiscal years beginning after November 15, 2007 and interim
        periods within those fiscal years. The Company is currently assessing the
        impact
        of SFAS 157 on the consolidated financial position and results of
        operations.
  *Quantifying
        and Evaluating the Materiality of Unrecorded Misstatements*
  In
        September 2006, the SEC issued Staff Accounting Bulletin No. 108 (“SAB 108”).
        SAB 108 provides guidance on quantifying and evaluating the materiality of
        unrecorded misstatements. SAB 108 is effective for fiscal years ending after
        November 15, 2006, with earlier application encouraged for any interim period
        of
        the first fiscal year ending after November 15, 2006, filed after the
        publication of SAB 108 (September 13, 2006). The adoption of SAB 108 did
        not
        have a material impact on the consolidated financial position and results
        of
        operations.
  *Income
        Tax Consequences of Issuing Convertible Debt with a Beneficial Conversion
        Feature*
  In
        September 2005, the EITF reached a consensus on Issue No. 05-8, “Income Tax
        Consequences of Issuing Convertible Debt with a Beneficial Conversion Feature”
(“EITF No. 05-8”). Under EITF No. 05-8, issuance of convertible debt with a
        beneficial conversion feature recorded pursuant to EITF 98-5, “Accounting for
        Convertible Securities with Beneficial Conversion Features or Contingently
        Adjustable Conversion Ratios” and EITF 00-27, “Application of Issue No. 98-5 to
        Certain Convertible Instruments” results in a temporary difference for purposes
        of applying SFAS 109. The deferred taxes recognized for the temporary difference
        should be recorded as an adjustment to additional paid-in capital. The EITF
        No.
        05-8 Consensus should be applied retrospectively to all instruments with
        a
        beneficial conversion feature accounted for under EITF 98-5 and EITF 00-27
        for
        periods beginning after December 15, 2005. The adoption of EITF 05-8 did
        not have a material impact on the financial statements.
  *Modification
        of Convertible Debt Instruments*
  In
        November 2006, the EITF reached a final consensus in EITF Issue 06-6
“Debtor’s Accounting for a Modification (or Exchange) of Convertible Debt
        Instruments” (“EITF No. 06-6”).  EITF No. 06-6 addresses the modification
        of a convertible debt instrument that changes the fair value of an embedded
        conversion option and the subsequent recognition of interest expense for
        the
        associated debt instrument when the modification does not result in a debt
        extinguishment pursuant to EITF No. 96-19, “Debtor’s Accounting for a
        Modification or Exchange of Debt Instruments.” The consensus should be applied
        to modifications or exchanges of debt instruments occurring in interim or
        annual
        periods beginning after November 29, 2006. The Company is currently evaluating
        the impact of this guidance on the consolidated financial position, results
        of
        operations or cash flows.
  13
 ***Table
            of Contents***
  *Accounting
        for a Previously Bifurcated Conversion Option in a Convertible Debt
        Instrument*
  In
        November 2006, the FASB ratified EITF Issue No. 06-7, “Issuer’s
        Accounting for a Previously Bifurcated Conversion Option in a Convertible
        Debt
        Instrument When the Conversion Option No Longer Meets the Bifurcation Criteria
        in FASB Statement No. 133, Accounting for Derivative Instruments and
        Hedging Activities” (“EITF No. 06-7”). At the time of issuance, an embedded
        conversion option in a convertible debt instrument may be required to be
        bifurcated from the debt instrument and accounted for separately by the issuer
        as a derivative under SFAS No. 133, based on the application of EITF No.
        00-19.
        Subsequent to the issuance of the convertible debt, facts may change and
        cause
        the embedded conversion option to no longer meet the conditions for separate
        accounting as a derivative instrument, such as when the bifurcated instrument
        meets the conditions of Issue 00-19 to be classified in stockholders’ equity.
        Under EITF No. 06-7, when an embedded conversion option previously accounted
        for
        as a derivative under SFAS No. 133 no longer meets the bifurcation criteria
        under that standard, an issuer shall disclose a description of the principal
        changes causing the embedded conversion option to no longer require bifurcation
        under SFAS No. 133 and the amount of the liability for the conversion option
        reclassified to stockholders’ equity. EITF No. 06-7 should be applied to all
        previously bifurcated conversion options in convertible debt instruments
        that no
        longer meet the bifurcation criteria in SFAS No. 133 in interim or annual
        periods beginning after December 15, 2006, regardless of whether the debt
        instrument was entered into prior or subsequent to the effective date of
        EITF
        No. 06-7. Earlier application of EITF No. 06-7 is permitted in periods for
        which
        financial statements have not yet been issued. The Company is currently
        evaluating the impact of this guidance on the consolidated financial position,
        results of operations or cash flows.
  *Registration
        Payment Arrangements*
  In
        December 2006, the FASB issued FASB Staff Position (“FSP”) EITF 00-19-2
“Accounting for Registration Payment Arrangements” (“FSP EITF 00-19-2”) which
        specifies that the contingent obligation to make future payments or otherwise
        transfer consideration under a registration payment arrangement should be
        separately recognized and measured in accordance with SFAS No. 5,
“Accounting for Contingencies.”  Adoption of FSP EITF 00-19-2 is
        required for fiscal years beginning after December 15, 2006.  The
        Company is currently evaluating the expected effect of FSP EITF 00-19-2 on
        its
        consolidated financial statements and is currently not yet in a position
        to
        determine such effects.
  *The
        Fair Value Option for Financial Assets and Financial
        Liabilities*
  In
        February 2007, the FASB issued Statement of Financial Accounting Standards
        No.
        159, “The Fair Value Option for Financial Assets and Financial Liabilities -
        Including an amendment to FASB Statement No. 115.” This statement permits
        companies to choose to measure many financial instruments and other items
        at
        fair value. The objective is to improve financial reporting by providing
        entities with the opportunity to mitigate volatility in reported earnings
        caused
        by measuring related assets and liabilities differently without having to
        apply
        complex hedge accounting provisions. This Statement is expected to expand
        the
        use of fair value measurement of accounting for financial instruments. This
        statement applies to all entities, including not for profit. The fair value
        option established by this statement permits all entities to measure eligible
        items at fair value at specified election dates. This statement is effective
        as
        of the beginning of an entity’s first fiscal year that begins after November 15,
        2007. The Company is currently assessing the impact adoption of SFAS No.
        159
        will have on the consolidated financial statements.
  **Note
        10 – Subsequent Events**
  On
        July
        30, 2007 the Company mailed a consent solicitation statement to each of the
        holders of record of the Company’s common stock as of the close of business on
        July 15, 2007 seeking to effect a 500 for 1 reverse split in connection with
        the
        Noteholders Agreement entered into with the Noteholders.  See Note 5 -
        Secured Convertible Notes, Embedded Derivative and Common Stock Warrants,
        above.  On August 6, 2007 the Company received sufficient stockholder
        consents such that the reverse split was approved as of the date.  The
        Company filed a certificate amendment to its articles of incorporation to
        effect
        the reverse split, which will be effective as of August 18, 2007.
  **ITEM
                  2.**
              **MANAGEMENT'S
                  DISCUSSION AND ANALYSIS OR PLAN OF OPERATION**
 
 **SPECIAL
        NOTE REGARDING FORWARD-LOOKING STATEMENTS**
  This
        report contains forward-looking statements.  These forward-looking
        statements are subject to certain risks and uncertainties that could cause
        actual results to differ materially from historical results or anticipated
        results, including those set forth under “ITEM 2. MANAGEMENT’S DISCUSSION AND
        ANALYSIS OR PLAN OF OPERATION—Risk Factors,” below, and elsewhere in this
        report.  In some cases, you can identify forward looking statements by
        terms such as “may,” “intend,” “might,” “should,” “could,” “would,” “expect,”
“believe,” “anticipate,” “estimate,” “predict,” “potential,” or the negative of
        these terms, and similar expressions are intended to identify forward-looking
        statements.  Such statements are subject to certain risks and
        uncertainties, which could cause actual results to differ materially from
        those
        projected.  Readers are cautioned not to place undue reliance on these
        forward-looking statements, which speak only as of the date
        hereof.  We undertake no obligation to publicly release the result of
        any revisions to these forward-looking statements, which may be made to reflect
        events or circumstances after the date hereof or to reflect the occurrence
        of
        unanticipated events.  The forward-looking statements in this report
        are based upon management’s current expectations and beliefs, which management
        believes are reasonable.
  14
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            of Contents***
  In
        this
        report, unless the context indicates otherwise, the terms “Company,” “we,” “us,”
and “our” refer to Satellite Security Corporation, a Nevada corporation, and its
        subsidiaries.
  **OVERVIEW**
  The
        Company currently does not have, and since March 7, 2007, has not had, any
        ongoing business operations or any revenue sources.  Until operations
        ceased in March of 2007, we had been engaged in the business of providing
        satellite-based asset tracking solutions and services, through the operations
        of
        our wholly owned subsidiary Satellite.  On March 7, 2007, Satellite
        lacked sufficient working capital to continue to fund its operations in the
        ordinary course of business, and all Satellite employees were
        released.  Satellite effectively ceased operations.  We do
        not have, and since March 7, 2007, have not had, any ongoing business operations
        or any revenue sources.  On April 2, 2007, we were forced to vacate
        our office premises due to non-payment of rent, a default under the terms
        of
        Satellite’s lease.
  In
        a
        current report on form 8-K filed with the Commission on July 2, 2007, we
        reported that in June 2007 the holders of these Secured Convertible Promissory
        Notes (the “Noteholders”) informed the Company that they intended to exercise
        their remedies under, among other sources of authority, the California Uniform
        Commercial Code (the "**UCC**") and Section 9620 thereof, pursuant
        to which they may accept collateral in satisfaction of the obligations secured
        by such collateral.  On June 29, 2007 we entered into an agreement
        with the Noteholders (the "Noteholders Agreement") pursuant to which we agreed
        to consent to the Noteholders foreclosure on, and to transfer to the
        Noteholders, substantially all of our assets including the stock of our
        subsidiary entities.  In exchange, the Noteholders agreed to (i)
        convert all outstanding amounts due and all obligations under the Notes into
        an
        aggregate of 2,000,000 shares of our common stock (calculated on a post split
        basis after taking into account the reverse split discussed below); (ii)
        waive
        all breaches, defaults and/or events of default under the loan documents
        related
        to the notes, and all penalties, accrued and unpaid interest, charges, fees
        and
        costs; and (iii) cancel all outstanding Class A common stock purchase warrants
        and Class B common stock purchase warrants issued to the Noteholders in
        connection with the Notes.
  The
        obligations under the Noteholders Agreement are subject to certain conditions,
        including principally a 1 for 500 reverse split of our outstanding common
        stock.    On July 30, 2007 we mailed to our stockholders and
        filed with the Commission a Consent Solicitation Statement seeking approval
        of
        the 1 for 500 reverse stock split and describing the transactions contemplated
        by the Agreement.  Effective as of August 6, 2007, we obtained
        stockholder approval of a 1 to 500 reverse stock split of our outstanding
        shares
        of common stock.  We have filed a certificate of amendment to our
        articles of incorporation with the Nevada Secretary of State which will become
        effective on August 18, 2007.  As of the effective time, every 500
        shares of our common stock that are issued and outstanding immediately prior
        to
        the effective time will be combined into one issued and outstanding share
        of
        common stock. Neither the par value per share of our common stock ($0.001)
        nor
        the total number of authorized shares of our common stock (250,000,000) will
        change.  No fractional shares of common stock will be issued in
        connection with the effectiveness of the reverse split.  Instead, we
        will round up and issue a whole share to each affected stockholder.
  Following
        the effectiveness of the reverse stock split, we intend to consummate the
        transactions contemplated by the Noteholders Agreement.  We are in
        default under the Notes, which are secured by all of our assets, and we owe
        more
        than $3.5 million thereunder.  Upon consummation of the transactions
        contemplated by the Noteholders Agreement, in accordance with the Noteholders'
        exercise of their remedy under California Uniform Commercial Code § 9620, we and
        Satellite will have consented to the acceptance by the Noteholders of our
        right,
        title and interest in substantially all of our assets and in exchange for
        our
        consent, the Noteholders will, among other things: (i) convert all outstanding
        amounts due and all obligations under the Notes into an aggregate of 2,000,000
        shares of our common stock (calculated on a post split basis after taking
        into
        account the reverse split discussed above); (ii) waive all breaches, defaults
        and/or events of default under the loan documents related to the Notes, and
        all
        penalties, accrued and unpaid interest, charges, fees and costs; and (iii)
        cancel all outstanding Class A common stock purchase warrants and Class B
        common
        stock purchase warrants issued to the Noteholders in connection with the
        Notes.  Accordingly, our obligations under the Notes, including our
        obligation to pay the principal, plus all accrued interest, will
        terminate.
  15
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  After
        giving effect to the reverse split and the transactions contemplated under
        the
        Noteholders Agreement, the Noteholders would hold 2,000,000 shares of our
        common
        stock, 1,000,000 of which would be transferred to our CEO, Zirk Engelbrecht,
        in
        exchange for certain commitments from Mr. Engelbrecht, and our other existing
        stockholders would hold approximately 220,000 shares of the outstanding common
        stock.  The reverse split is not intended to be a going private
        transaction.
  **RESULTS
        OF DISCONTINUED OPERATIONS**
  *Revenues*
  We
        had no
        revenues for the three months ended June 30, 2007, compared to $449,409 for
        the
        same period in 2006.  Revenues were $96,875 for the six months ended
        June 30, 2007, compared to $655,297 for the same period in 2006, a decrease
        of
        $558,422 or 85%.  The decreases were primarily due to the cessation of
        operations of Satellite.
  *Cost
        of Revenues*
  Cost
        of
        revenues includes hardware, wireless airtime expense and personnel-related
        costs
        for our Monitoring and Support Center.  We had no costs of revenues
        for the three months ended June 30, 2007, compared to $388,008 or 86% of
        revenues for the same period in 2006.  Costs of revenues were $94,823
        or 98% of revenues for the six months ended June 30, 2007, compared to $561,592
        or 86% of revenues for the same period in 2006, a decrease of $466,769, or
        83%.  The decrease in cost of revenues is related primarily to the
        cessation of operations of Satellite.
  *Research
        and Development*
  Research
        and development expenses include payroll, and costs associated with software
        development, product design and outsourcing for Satellite.  We had no
        research and development expenses for the three months ended June 30, 2007,
        compared to $62,634 for the same period in 2006.  Research and
        development expenses were $69,986 for the six months ended June 30, 2007,
        compared to $137,167 for the same period in 2006, a decrease of $67,181,
        or
        49%.  The decreases were primarily due to the cessation of operations
        of Satellite on March 7, 2007.
  *Marketing
        and Sales Expenses*
  Marketing
        and sales expenses include payroll, and costs associated with advertising,
        promotions, trade shows, seminars, and similar programs, as well and travel
        expenses for Satellite.  We had no marketing and sales expenses the
        three months ended June 30, 2007, compared with $155,951 for the same period
        in
        2006.  Marketing and sales expenses were $42,010 for the six months
        ended June 30, 2007, compared with $288,946 for the same period in 2006,
        a
        decrease of $246,936, or 85%.  The decreases were primarily due to the
        cessation of operations of Satellite.
  *General
        and Administrative*
  General
        and administrative expenses include payroll and costs associated with the
        finance, facilities, and legal and other administrative functions of Satellite
        and the Company.  General and administrative costs were $155,485 for
        the three months ended June 30, 2007 compared with $872,642 for the same
        period
        in 2006, a decrease of $717,157 or 82%.  General and administrative
        costs were $746,598 for the six months ended June 30, 2007 compared with
        $1,468,988 for the same period in 2006, a decrease of $722,390 or
        49%.  The decreases were primarily due to the cessation of operations
        of Satellite.
  *Interest
        Expense*
  Interest
        expense was $2,345,999 for the three months ended June 30, 2007 compared
        to
        $740,524 for the same period in 2006.  Interest expense was $2,723,316
        for the six months ended June 30, 2007 compared to $866,368 for the same
        period
        in 2006.
  16
 ***Table
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  The
        increase in interest expense for the three and six months ended June 30,
        2007
        was primarily due to the following:  (i)forgiveness of interest
        on
        the $3,300,000 of Notes as a result of entering into the Noteholders Agreement
        on June 29, 2007, and (ii)non-cash debt discount
        amortization associated with the Secured Note Agreement as of June 30,
        2007.  Interest expense on the amortization of the balance of debt
        discount on the $3,3000,000 of the Notes for the six months ended June 30,
        2007
        was $2,784,658.
  *Net
        Change in Fair Value of Common Stock Warrants and Embedded Derivative
        Liability*
  Net
        change in fair value of common stock warrants and embedded derivative liability
        of $3,063,108 for the six months ended June 30, 2007 consists of the net
        change
        in the carrying values of the liabilities for the common stock warrants and
        the
        embedded derivative liabilities related to the Notes on June 30,
        2007.
  *Net
        Profit/Loss*
  Net
        profit/loss includes profit/loss from operations and interest
        expense.  We recorded a net profit of $1,627,637 for the six months
        ended June 30, 2007 compared to a net loss of $2,667,764 for the same period
        in
        2006.  The increase in net profit for the six months ended June 30,
        2007 as compared to the same period of 2006 was due to a decrease in operating
        costs of $1,036,508; and charges incurred in connection with the Noteholders
        Agreement including increased interest expense of $1,856,948; the net change
        in
        fair value of $3,063,108 on common stock warrants and embedded derivative
        related to the Notesand other income which consists mainly of a gain on the
        transfer of assets and liabilities of Satellite to the Noteholders of
        $2,144,385.
  *Liquidity
        and Capital Resources*
  On
        June
        30, 2007, we had cash of $705 and no other current assets.  Our
        working capital deficit as of June 30, 2007 was $168,104.
  Net
        cash
        provided by operating activities during the six months ended June 30, 2007
        was
        $545,893.  The primary use of cash from operating activities was the
        operating loss of $856,541. This was offset by  non-cash adjustments
        required by the Noteholders Agreement including income of $3,063,108 from
        the
        change in value of warrants and embedded derivative liability, non-cash interest
        expense of $2,784,658, and the transfer of all Satellite assets and liabilities
        to the Noteholders in accordance with the Noteholders Agreement.
  There
        was
        no cash used by investing activities during the three month period ended
        June
        30, 2007.  We have no significant capital expenditures planned within
        the foreseeable future.
  Since
        our
        inception, we have financed our cash needs primarily through financing
        activities. Net cash
        provided by financing activities for the six months ended June 30, 2007 was
        $125,440 primarily from unsecured loans from our chief executive
        officer.
  As
        emphasized in the Report of Independent Registered Public Accounting Firm
        on our
        December 31, 2006 financial statements, we have incurred recurring negative
        cash
        flows from operations, significant losses, working capital deficits and
        increasing shareholder deficiencies. Further, we have yet to establish
        profitable operations. These factors, among others, raise substantial doubt
        about our ability to continue as a going concern.
  **RISK
        FACTORS**
  This
        report includes forward-looking statements about our business and results
        of
        operations that are subject to risks and uncertainties.  See “SPECIAL
        NOTE REGARDING FORWARD-LOOKING STATEMENTS,” above.  Factors that could
        cause or contribute to such differences include those discussed
        below.  In addition to the risk factors discussed below, we are also
        subject to additional risks and uncertainties not presently known to us or
        that
        we currently deem immaterial.  If any of these known or unknown risks
        or uncertainties actually occur, our business could be harmed
        substantially.
  ***We
        have ceased operations*.**
  We
        have
        ceased the operations of Satellite, our sole operating
        subsidiary.  Accordingly, our current operations have been limited to
        efforts to the sale of our current assets.  We currently have no cash
        on hand and our remaining operations are supported through loans from our
        sole
        director and chief executive officer,
        Mr. Zirk Engelbrecht.  We are also looking to enter into a
        business combination with another operating company.  However, no
        agreements currently exist with any prospective candidates with respect to
        a
        business combination.  We will not generate any revenues until, at the
        earliest, we successfully negotiate and structure transactions to finance
        future
        operations or after the consummation of a business combination.  We
        cannot assure you as to when, or if, we will successfully negotiate and
        structure transactions to finance future operations or a business combination
        will occur. If we are unable to negotiate and structure transactions to finance
        future operations or enter into a business combination, we will not be able
        to
        continue as a going concern.
  17
 ***Table
            of Contents***
  ***In
        order to continue as a going concern will need to enter into a business
        combination and raise funds in the public or private capital
        markets.  We do not know at this time whether we will be successful in
        entering into a business combination, the nature of the business that we
        would
        undertake as a result of that combination, or the impact on our capital
        structure from any such combination or related
        financing.***
  We
        do not
        anticipate restarting our satellite based asset tracking
        business.  Consequently, if we are to continue as a going concern, we
        will have to identify a target operating company and successfully enter into
        a
        business combination.  While we have had discussions with prospective
        operating companies, no contracts or arrangements with any target operating
        company exist at this time.  We do not know what business any target
        operating company will be engaged in, or what risks we may face in connection
        with such a combination.  Any combination will likely result in a
        substantial recapitalization of our debt and equity.  We cannot
        provide any guidance or assurance as to the possible terms of any
        recapitalization or financing, or the impact on the existing holders of our
        debt
        and equity.  If we fail to continue as a going concern, you may lose
        all of the value of your investment.  Even if we are successful in
        obtaining additional funds, the terms of the financing may have the effect
        of
        substantially diluting your interest.
  ***Our
        ability to restart operations or successfully effect a business combination
        and
        to be successful afterwards will be completely dependent upon the efforts
        of our
        key personnel, some of whom may join us following any future financing or
        business combination and may be unfamiliar with the requirements of operating
        a
        public company, which may adversely affect our
        operations.***
  Our
        ability to successfully restart operations or effect a business combination
        will
        be completely dependent upon the efforts of our current key
        personnel.  However, if we are successful in effecting a business
        combination, we anticipate employing other personnel including key management
        personnel. While we intend to closely scrutinize any additional individuals
        we
        engage after a business combination or financing transaction, we cannot assure
        you that our assessment of these individuals will prove to be correct or
        that
        these individuals will remain with us. These individuals may be unfamiliar
        with
        the requirements of operating a public company as well as United States
        securities laws which could cause us to expend time and resources helping
        them
        become familiar with such laws. This could be expensive and time-consuming
        and
        could lead to various regulatory issues that may materially adversely affect
        our
        operations.
  ***We
        are dependant upon the continued services and support from our sole director
        and
        chief executive officer to continue our operations.***
  Our
        continued operations are substantially dependent on
        Zirk Engelbrecht.  Mr. Engelbrecht currently serves as our
        sole director and chief executive officer. In addition, Mr. Engelbrecht has
        provided the financial support necessary to maintain our status as a reporting
        company under the Securities Exchange Act of 1934, or the “Exchange Act,”
including payment of the fees of our independent auditors and legal
        counsel.  We currently have no unrestricted cash on hand and no other
        arrangements for payment of these services.  Mr. Engelbrecht is
        engaged in other significant business endeavors and is not obligated to
        contribute any specific number of hours per week to our affairs.  If
        Mr. Engelbrecht's other business affairs require him to devote substantial
        amounts of time to such affairs in excess of their current commitment levels,
        it
        could limit his ability to devote time to our affairs and could have a negative
        impact on our ability to consummate any sale of assets, financing transaction
        or
        business combination.  If Mr. Engelbrecht were to resign from his
        position of director or chief executive officer, or to withdraw his financial
        support, we may be forced to discontinue operations altogether.
  ***The
        sale of the shares of our common stock acquired in private placements could
        cause the price of our common stock to decline.***
  Under
        the
        terms of the Noteholders Agreement, the Notes would convert into 2,000,000
        shares of our common stock and as of July 2007 the investors may rely on
        the
        provisions of Rule 144 to begin effect sales and may resell the shares of
        our
        common stock acquired upon the conversion of the Notes.  We have no
        way of knowing whether or when such shares may be sold.  Depending
        upon market liquidity at the time, a sale of shares by the holders of the
        Notes
        at any given time could cause the trading price of our common stock to
        decline.  The sale of a substantial number of shares of our common
        stock, or anticipation of such sales, could make it more difficult for us
        to
        sell equity or equity-related securities in the future at a time and at a
        price
        that we might otherwise wish to effect sales.
  18
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  ***We
        may issue additional shares of our capital stock, including through convertible
        debt securities, to finance future operations or complete a business
        combination, which would reduce the equity interest of our stockholders and
        likely cause a change in control of our ownership.***
  Although
        we have no commitments as of the date of this report to issue any additional
        securities, we may issue a substantial number of additional shares of our
        common
        stock or preferred stock, or a combination of both, including through
        convertible debt securities, to finance future operations or complete a business
        combination.  The issuance of additional shares of our common stock or
        any number of shares of preferred stock, including upon conversion of any
        debt
        securities:
  ·
              may
                  significantly reduce the equity interest of our current
                  stockholders;
 ·
              will
                  likely cause a change in control if a substantial number of our
                  shares of
                  common stock or voting preferred stock are issued, which may affect,
                  among
                  other things, our ability to use our net operating loss carryforwards,
                  if
                  any, and could also result in a change in management;
                  and
 ·
              may
                  adversely affect prevailing market prices for our common
                  stock.
  ***Because
        we may be deemed to have no “independent” directors, actions taken and expenses
        incurred by our officer and director on our behalf will generally not be
        subject
        to “independent” review.***
  Zirk Engelbrecht,
        our chief executive officer, is currently our sole
        director.  Mr. Engelbrecht does not have an employment agreement
        with us, and does not currently receive any compensation for his
        services.  However, he may receive compensation in the future and may
        receive reimbursement for out-of-pocket expenses incurred by him in connection
        with activities on our behalf, such as identifying potential financing
        opportunities or target businesses and performing due diligence related
        thereto.  Because of his position as our sole director and executive
        officer, we will not have the benefit of independent directors examining
        the
        propriety of decisions made by Mr. Engelbrecht. Although we believe that
        all actions taken by Mr. Engelbrecht on our behalf will be in our best
        interests, we cannot assure you that this will be the case. If actions are
        taken, or expenses are incurred that are not in our best interests, it could
        have a material adverse effect on our business and operations and the price of
        our stock.
  ***A
        limited number of stockholders own approximately 48.67% of our stock and
        may
        act, or prevent certain types of corporate actions, to the detriment of other
        stockholders.***
  As
        of
        June 30, 2007, our directors, officers and greater than 5% stockholders own,
        approximately 48.67% of our issued and outstanding common
        stock.  Further, following the effectiveness of the reverse split
        (August 18, 2007), our directors, officers and greater than 5% stockholders
        will
        own approximately 60.31% of our issued and outstanding common
        stock.  Accordingly, these stockholders may, if they act together,
        exercise significant influence over all matters requiring stockholder approval,
        including the election of a majority of the directors and the determination
        of
        significant corporate actions.  This concentration could also have the
        effect of delaying or preventing a change in control that could otherwise
        be
        beneficial to our stockholders.
  ***We
        have never paid dividends on our capital stock, and we do not anticipate
        paying
        any cash dividends in the foreseeable future.***
  We
        have
        paid no cash dividends on any of our classes of capital stock to date and
        we
        currently intend to retain our future earnings, if any, to fund the development
        and growth of our business.  In addition, the terms of the Notes
        prohibit us from making any dividend payment or distribution to holders of
        our
        common stock while any portion of the Notes remain outstanding.  As a
        result, capital appreciation, if any, of our common stock will be your sole
        source of gain for the foreseeable future.
  ***Our
        common stock is traded on the OTCBB, which may be detrimental to
        investors.***
  Our
        shares of common stock are currently traded on the OTCBB.  Stocks
        traded on the OTCBB generally have limited trading volume and exhibit a wide
        spread between the bid/ask quotation.
  19
 ***Table
            of Contents***
  ***Our
        common stock is subject to penny stock rules.***
  Our
        common stock is subject to Rule 15g-1 through 15g-9 under the Exchange Act,
        which imposes certain sales practice requirements on broker-dealers which
        sell
        our common stock to persons other than established customers and “accredited
        investors” (generally, individuals with net worths in excess of $1,000,000 or
        annual incomes exceeding $200,000 (or $300,000 together with their
        spouses)).  For transactions covered by this rule, a broker-dealer
        must make a special suitability determination for the purchaser and have
        received the purchaser’s written consent to the transaction prior to the
        sale.  This rule adversely affects the ability of broker-dealers to
        sell our common stock and purchasers of our common stock to sell their shares
        of
        such common stock.  Additionally, our common stock is subject to the
        SEC regulations for “penny stock.”  Penny stock includes any equity
        security that is not listed on a national exchange and has a market price
        of
        less than $5.00 per share, subject to certain exceptions.  The
        regulations require that prior to any non-exempt buy/sell transaction in
        a penny
        stock, a disclosure schedule set forth by the SEC relating to the penny stock
        market must be delivered to the purchaser of such penny stock.  This
        disclosure must include the amount of commissions payable to both the
        broker-dealer and the registered representative and current price quotations
        for
        the common stock.  The regulations also require that monthly
        statements be sent to holders of penny stock which disclose recent price
        information for the penny stock and information of the limited market for
        penny
        stocks.  These requirements adversely affect the market liquidity of
        our common stock.
  ***Recently
        enacted and proposed changes in securities laws and regulations are likely
        to
        increase our costs.***
  The
        Sarbanes-Oxley Act of 2002, or SOX, that became law in July 2002 requires
        changes in some of our corporate governance, public disclosure and compliance
        practices.  SOX also requires the SEC to promulgate new rules on a
        variety of subjects.  We expect these developments to increase our
        legal and financial compliance costs, and to make some activities more
        difficult, such as stockholder approval of new option plans.  We
        expect these developments to make it more difficult and more expensive for
        us to
        obtain director and officer liability insurance, and we may be required to
        accept reduced coverage or incur substantially higher costs to obtain
        coverage.  These developments could make it more difficult for us to
        attract and retain qualified members of our board of directors, particularly
        to
        serve on our audit committee, and qualified executive officers.  We
        are presently evaluating and monitoring regulatory developments and cannot
        estimate the timing or magnitude of additional costs we may incur as a
        result.
  20
 ***Table
            of Contents***
  **ITEM
                  3.**
              **CONTROLS
                  AND PROCEDURES**
  Our
        disclosure controls and procedures are designed to ensure (i) that
        information we are required to disclose in the reports we file or submit
        under
        the Exchange Act are recorded, processed, summarized, and reported within
        the time periods specified in the SEC’s rules and forms; and (ii) that
        information we are required to disclose in the reports we file or submit
        under
        the Exchange Act is accumulated and communicated to our management, including
        our principal executive and principal financial officer, or persons performing
        similar functions, as appropriate to allow timely decisions regarding required
        disclosure.
  We
        maintain disclosure controls and procedures designed to ensure that material
        information related to our company is recorded, processed, summarized and
        reported within the time periods specified in the SEC rules and
        forms.
  Under
        the
        supervision of our chief executive officer, we evaluated the effectiveness
        of
        the design and operation of our disclosure controls and procedures as of
        the end
        of the period covered by this report. Based upon that evaluation, our chief
        executive officer concluded that as of June 30, 2007, the design and operation
        of such disclosure controls and procedures were not effective at the reasonable
        assurance level because of a material weakness.
  *Material
        Weakness.*
  The
        Public Company Accounting Oversight Board has defined a material weakness
        as a
“significant deficiency or combination of significant deficiencies that results
        in more than a remote likelihood that a material misstatement of the annual
        or
        interim financial statements will not be prevented or detected.”  In
        relation to the audit for the year ended December 31, 2006, management and
        our independent auditor, Tauber & Balser, P.C., identified the
        following material weakness in our internal controls:  During the
        audit for the year ended December 31, 2006, our auditors proposed many
        audit adjustments that were discussed with management, with final concurrence
        that such adjustments should be recorded by management.  We did not
        have in place adequate controls to ensure that the general ledger balances
        were
        accurate and reported in accordance with generally accepted accounting
        principals applied in the United States.
  Subsequent
        to the year ended December 31, 2006, we were involved in a number of significant
        events, including the resignation of our chief financial officer and the
        cessation of operations of Satellite.  With the cessation of
        operations, we released all but one of our employees and our internal control
        over financial reporting is entirely at the board of directors
        level.
  *Changes
        In Internal Controls Over Financial Reporting.*
  No
        changes were made in our internal control over financial reporting (as defined
        in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter
        ended
        June 30, 2007 that has materially affected, or is likely to materially affect,
        our internal control over financial reporting.
  *Limitations
        On Disclosure Controls And Procedures.*
  Our
        management does not expect that our disclosure controls or internal controls
        over financial reporting will prevent all errors or all instances of fraud.
        A
        control system, no matter how well designed and operated, can provide only
        reasonable, not absolute, assurance that the control system's objectives
        will be
        met. Further, the design of a control system must reflect the fact that there
        are resource constraints, and the benefits of controls must be considered
        relative to their costs. Because of the inherent limitations in all control
        systems, no evaluation of controls can provide absolute assurance that all
        control issues and instances of fraud, if any, within our company have been
        detected. These inherent limitations include the realities that judgments
        in
        decision-making can be faulty, and that breakdowns can occur because of simple
        error or mistake. Controls can also be circumvented by the individual acts
        of
        some persons, by collusion of two or more people, or by management override
        of
        the controls. The design of any system of controls is based in part upon
        certain
        assumptions about the likelihood of future events, and any design may not
        succeed in achieving its stated goals under all potential future conditions.
        Over time, controls may become inadequate because of changes in conditions
        or
        deterioration in the degree of compliance with policies or procedures. Because
        of the inherent limitation of a cost-effective control system, misstatements
        due
        to error or fraud may occur and not be detected.
  21
 ***Table
            of Contents***
  Our
        company (as a “non-accelerated filer”) is not now subject to the requirements of
        Section 404(b) of SOX, which requirements, subject to change, are now scheduled
        to be effective for fiscal years ending on or after December 15,
        2008.  Under Section 404(b), our auditors will be required to perform
        an audit of management's assessment of the effectiveness of our internal
        control
        over financial reporting intended to enable us to issue a report, based on
        our
        audit, containing their opinions on both management's assessment and on the
        effectiveness of our internal control over financial reporting. Section 404(a)
        of the SOX, however, requires management to conduct and report upon its own
        assessment of a company’s internal control over financial reporting for fiscal
        years ending on or after December 15, 2007, and, accordingly, places substantial
        responsibility on management to perform considerable work in preparing for
        this
        activity, not only in the design and conduct of its testing and other assessment
        procedures in developing adequate, detailed documentation of the company's
        internal control policies and procedures, but also the procedures applied
        by
        management in conducting its assessment and the results thereof. With respect
        to
        such preparation only, but not with respect to performing management's
        assessment procedures, our auditors are available to provide only limited
        assistance in documenting and making recommendations to management regarding
        internal controls, subject to advance approval of the audit committee or
        equivalent financial oversight or governance body, but only to the extent
        that,
        in their sole judgment, our auditors believe their independence will not
        be
        impaired.
  **PART
        II — OTHER INFORMATION**
 
 **ITEM
                  1.**
              **LEGAL
                  PROCEEDINGS**
  In
        the
        course of business, the Company has been, and may continue to be, involved
        in
        various claims seeking monetary damages and other relief.  The amount
        of the ultimate liability, if any, from such claims cannot be determined.
        However, in the opinion of the Company's management, the ultimate liability
        for
        any legal claims currently pending against the Company will not have a material
        adverse affect on the Company's financial position, results of operations
        or
        cash flows.
  **ITEM
                  2.**
              **UNREGISTERED
                  SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**
  None.
  **ITEM
                  3.**
              **DEFAULTS
                  UPON SENIOR SECURITIES**
  None.
  **ITEM
                  4.**
              **SUBMISSION
                  OF MATTERS TO A VOTE OF SECURITY HOLDERS**
  None.
  **ITEM
                  5.**
              **OTHER
                  INFORMATION**
  None.
  **ITEM
                  6.**
              **EXHIBITS**
  **Exhibit
                  No.**
              
              **Description**10.1
              
              Agreement
                  entered into as of June 29, 2007, by and among Satellite Security
                  Corporation, a Nevada corporation, Satellite Security Systems,
                  Inc., a
                  California corporation, Zirk Engelbrecht, an individual, the holders
                  of secured convertible notes identified on the signature pages
                  hereto.
                  (1)31.1*
              
              Certification
                  of Periodic Report by the Chief Executive Officer, Pursuant to
                  Section 302
                  of the Sarbanes-Oxley Act of 2002.31.2*
              
              Certification
                  of Periodic Report by the Chief Financial Officer, Pursuant to
                  Section 302
                  of the Sarbanes-Oxley Act of 2002.32.1*
              
              Certification of
                  Chief Executive Officer pursuant to 18 U.S.C, Section 1350, adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of
                  2002.32.2*
              
              Certification of
                  Chief Financial Officer pursuant to 18 U.S.C, Section 1350,
                  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                  2002.____________*  Filed
                  as an exhibit to this report(1)  Incorporated
                  by reference from the registrant's Current Report on Form 8-K,
                  filed with
                  the Commission on July 2, 2007.
  22
 ***Table
            of Contents***
  **SIGNATURES**
 
 In
        accordance with the requirements of the Exchange Act, the registrant caused
        this
        report to be signed on its behalf by the undersigned, thereunto duly
        authorized.
  **SATELLITE
                    SECURITY CORPORATION**By:
                /s/
                    Mr.  Zirk EngelbrechtMr.  Zirk EngelbrechtChief
                    Executive OfficerDated:  August
                    17,2007






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